Background
Jacob Adams, an employee of Hopkins County, suffered injuries in a motor vehicle accident while operating a county vehicle in the scope of his employment. Adams filed suit seeking uninsured motorist benefits from his personal insurer, Kentucky Farm Bureau Mutual Insurance Company, and from the county’s insurance provider, the Kentucky Association of Counties All Lines Trust Fund (KALF). Adams also named Hopkins County as a defendant.
Hopkins County moved to dismiss based on sovereign immunity. Adams argued that the county had waived its sovereign immunity to the limited extent permitted under Kentucky Revised Statutes section 67.180 by participating in KALF. The circuit court denied the motion to dismiss, leading Hopkins County to appeal.
The Court’s Holding
The Kentucky Court of Appeals reversed the circuit court, holding that Hopkins County’s participation in KALF does not constitute a limited waiver of sovereign immunity under KRS 67.180. The court applied the framework established in Independence Bank v. Welch, 636 S.W.3d 528 (Ky. 2021), which requires that for a waiver to occur, a county must “purchase policies of insurance” and any judgment must be against an “insurance carrier” with liability shifted from the county.
The court distinguished between traditional commercial insurance and self-insurance trusts. KALF is a self-insurance trust authorized under the Interlocal Cooperation Act, where participating counties contribute funds held in trust for indemnification. Unlike commercial insurance, self-insurance trusts do not involve risk shifting—all risk remains with the participating counties. The court found that the statute’s operative language “purchase policies of insurance” does not encompass participation in a self-insurance trust, and KALF does not qualify as an “insurance carrier” as contemplated by the statute.
The court noted that while Hopkins County’s participation in KALF is structurally closer to traditional insurance than the individual self-insurance policy addressed in Welch, the critical distinction remains: KALF is a trust structure where risk stays with the counties, not a commercial insurance arrangement where risk is transferred to a third-party insurer.
Key Takeaways
- Kentucky counties maintain sovereign immunity when participating in self-insurance trusts, even when those trusts resemble insurance arrangements structurally.
- KRS 67.180’s limited waiver of sovereign immunity applies only to purchases of commercial insurance policies, not to participation in self-insurance trusts created under the Interlocal Cooperation Act.
- Risk shifting is a critical distinction: commercial insurance transfers risk from the county to an external carrier, while self-insurance trusts keep risk with the participating governmental entities.
- Employees may still pursue uninsured motorist benefits through the insurance policy itself, but cannot sue the county directly based on its insurance participation.
Why It Matters
This decision clarifies the scope of sovereign immunity waivers for Kentucky counties and protects municipal entities from direct litigation based on self-insurance trust participation. Counties that contribute to self-insurance pools like KALF retain sovereign immunity despite having insurance-like mechanisms in place. The ruling reinforces the distinction between true insurance (which carries limited waiver consequences) and self-insurance arrangements (which do not).
For claimants, the decision means that while employees injured in the scope of employment may recover uninsured motorist or other benefits through the insurance policy, they must pursue those claims against the insurance entity itself rather than the county government. The holding preserves governmental sovereign immunity protections while acknowledging that employees retain direct claims against insurance policies maintained for their benefit.